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Shareholders in gun manufacturer Sturm, Ruger & Company (NYSE:RGR) have benefited greatly from the recent surge in gun demand driven by gun control and crime rate fears. Its stock price increased 45% over the past year beating the S&P 500 (see chart below). Looking at Ruger from the standpoint of strengths, weaknesses, opportunities, and threats should help you understand the direction of this company.

Focused management – The keen focus of Ruger’s management drives this company. Ruger’s CEO Michael Fifer owns approximately 1.3% of the company’s stock, which incentivizes some of the focus.

Fifer’s focus on accurate production planning shows with his focus on the “sell-through” rate or the rate of sales from the distributor to the retailer. Backlog showed an astronomical rise in the gun industry and he feels that the sell-through rate provides a more accurate picture of industry fundamentals. This line of reasoning stems from industry-wide over-ordering from distributors due to fear of lost sales opportunity because of a low supply of finished goods. Ruger’s sell-through rate increased 63% in 2012.

In their latest earnings calls weapons makers discussed the vast expansion of backlog. Ruger’s backlog more than doubled to 1.5 million units in 2012. Rival gun manufacturer Smith & Wesson Holding Corporation (NASDAQ:SWHC) saw its backlog triple so far. Winchester, the ammunitions arm of chemical company Olin Corporation (NYSE:OLN), saw its backlog increase by a factor of ten in 2012.

Ruger’s management demonstrates remarkable ability to maximize production for every capital expenditure dollar. According to Ruger’s last earnings call, a 7% increase in capital equipment base led to a 52% increase in unit production.

Strong brand – Ruger represents a well-recognized brand name with a rich history. This also serves as a barrier to entry. Someone new can manufacture a gun, but it won’t possess the Ruger name.